The Dynamics of SME - Large Business Linkages: Findings from Six Cases

Recent literature identifies linkages with large firms as some of the enablers of small and medium enterprise (SME) development and competitiveness. This study explores the types of linkages that SMEs located in Metro Manila have forged with large firms, including how these linkages started, their advantages, and disadvantages. The paper also explores the nature of competition between SMEs and large firms, the effect of such competition on SMEs, and how SMEs overcome the disadvantages of small size. The research methodology is descriptive. Key informant interviews with six owners and managers of SMEs involved in construction, trading and services were conducted. They were asked about the details of their engagement with large firms, the nature and effect of competition against large firms, and to cite, if there are any, government programs that helped them create or sustain linkages with large firms. Interviews revealed that SMEs have forged forward and backward linkages as well as formal partnerships with large firms. Through these linkages, the SMEs can access inputs, technologies, technical expertise, market information, and marketing support. Competing with large firms has its benefits and disadvantages, but it has mostly exerted pressure on SMEs to improve their production processes, their products and services, or distribution and marketing channels.